Finance: Laying waste: the landfill tax

Environmentalists responded with disappointment to last week's Budget for its failure to discourage car use and green belt development. But one of the Chancellor's less noticed changes was to increase the rate of the landfill tax, giving rise to mixed feelings among environmental lobbyists.

From April 1999 the standard landfill tax, levied on active wastes, will rise from pounds 7 a tonne to pounds 10 a tonne. For the first time, dumping inert wastes in quarries will be exempted from tax, to encourage repair and redevelopment of scarred sites. The lower rate on the dumping of inactive waste remains at pounds 2 a tonne.

Many green campaigners support the landfill tax, for creating a financial incentive to reduce waste. Unfortunately, it has also increased fly-tipping, in the countryside and in town centres. Local authorities complain that the extra tax will cost them more, because of the increase in illegal dumping.

Less controversial is the role of the landfill tax in supporting groups promoting recycling and waste reduction, through the Environmental Bodies Credit Scheme. Waste management operators - companies and local authorities - can give grants under this scheme, and reclaim 90 per cent of donations, up to a maximum of 20 per cent of their landfill tax liability. It is regulated by Entrust, a non-profit-making company which approves bodies to receive funds from waste managers to distribute to local groups. The scheme got off to a slow start, but now raises pounds 60m a year.

Customs & Excise, which oversees the operation of the landfill tax, last week published a review of the tax and credit scheme. It found general support, despite some detailed reservations. In particular, respondents felt that Entrust and other bodies did not take a sufficiently strategic approach to dispersing grants.

Ken Manton, chair of the Local Government Association's waste and environmental management committee, shares those reservations. "We would have been much happier if local authorities had had a greater role in deciding priorities," he says. "Money may be targeted towards the interests of a local company." He fears that public relations play too great a part in deciding where grants go. One parish council reversed its opposition to a mineral extraction proposal, which will later become a landfill site, after receiving a grant from a developer. The public inquiry was influenced by the parish's change of heart, and overruled the original refusal to grant planning permission.

Chas Ball is secretary of the UK Environmental Bodies Council, representing groups receiving money under the scheme. He, too, has concerns about the way it works. "I think it is innovative and a broadly effective way of bringing new money into environmental projects," he says. "But there is still some learning to be done to make sure that the best projects get the money, rather than those who shout the loudest. There should be more transparency in the way money is allocated; it is a peculiar system, based on the patronage of the waste management companies. We want to avoid duplication of grants, for example by not giving money to universities for research projects that are already being done elsewhere."

One of the major approved bodies is Enventure, which has three regional companies whose sole purpose is to distribute landfill tax credits. "We went out to find various projects that would fit the criteria of Entrust, including involving parish councils and schools," says Gavan Rostron, project manager of Enventure Northern. "We then set up a series of management teams to assess for community benefit. We put forward a recommended level of funding, which was approved by Entrust."

Projects funded through Enventure include restoring listed buildings such as churches and village halls, and educational schemes promoting recycling and waste reduction. A CD-Rom is being produced, to go to all schools in the region. Mr Rostron says the scheme operates as one of the quickest and easiest ways for environmental projects to obtain funding. Enventure says that the waste management companies are not involved in deciding which groups get grants.

Hull University's research pollution centre has received grants through Enventure to fund a range of activities, including a website that will act as a national signpost to specialist research for academics and professionals in the waste management industry, and funding for a PhD student to study contaminated land sites. Another researcher is to examine how bacteria break down organic compost, and how they might be stimulated to work more quickly.

Biffa Waste Services has allocated several million pounds through tax credits since the scheme began. A spokesman, John Dresser, says: "We are happy with the way it is going. We have hundreds of requests coming in from village halls, for otter rescue schemes, for woodland and canal renovation, and various school projects."

The benefits of the tax credit scheme are already being seen, though critics say that more could be achieved if the grant-giving process were better co-ordinated. Customs & Excise respond that Entrust's job does not include achieving value for money. It believes that a lack of strategy is an acceptable price to pay for a system that has support from both waste managers and environmental groups, and has firm roots in local organisations.